US student loans: The trillion dollar debt trap

Jill McDevitt says she is struggling to make a living in spite of having a PhD

Jill McDevitt, 27, is well-educated and renowned in her field - but she's overwhelmed by $150,000 (£93,500; 116,300 euros) of student debt.

She lives with her partner in the suburbs of Philadelphia, in an 800 sq ft flat that lacks laundry facilities. "I have a PhD, and I do my laundry in the 'coin op' place," she says.

Ms McDevitt has a career that she loves - lecturing, writing and speaking on human sexuality - but as she did not receive any financial aid, she took out private loans to pay for her degrees, leaving her with monthly payments of $1,600.

"I just cannot pay that amount," she says, and having tried to negotiate with several lenders without success, she is losing her will to fight.

"My credit is already in the dumps," she says. "What is the incentive if I'm already screwed?"

'Trip through hell'

Ms McDevitt is not alone. Student debt is a one trillion dollar headache for the US economy - and it is only getting worse.

As the cost of a university education soars, default rates are on the rise. Some estimates say that more than five million borrowers in the US have defaulted on their student loans. Almost 375,000 people defaulted in the latest year alone, the US Department of Education says.

And those borrowers can face dire consequences.

The federal government has strong tools to help recover debt from delinquent borrowers, including garnishing 15% of their take-home pay, and retirement income, according to education finance expert Mark Kantrowitz, publisher of the FinAid and Fastweb sites.

Candice Varetoni says she wishes she had spent less on her degree

"It's like a trip through hell with no light at the end of the tunnel," he says.

Borrowers in default cannot get a mortgage or a car loan. And their credit will be ruined, which can affect their ability to rent a flat or even get a job.

"We are at a tipping point," says Anne Johnson, director of Campus Progress, an advocacy group.

'Tripped up'

The long-term impact of heavy debt on young people is overwhelming, says Ms Johnson.

"It's changing their entire economic outlook for their future," she says. "It's a huge challenge."

She says that the rising cost of higher education is a large part of the problem.

In the past 30 years, tuition costs have risen by about 1,000%. A four-year degree from a private university can cost close to $150,000.

Experts say that students do not always appreciate the full cost of their education.

"Otherwise-sophisticated consumers can get tripped up in how much college is going to cost, and how to pay for it," says Lauren Asher, president of the Institute for College Access and Success.

Debt-free future

Candice Varetoni, 23, a recent university graduate who is $67,000 in debt, lives with her parents in upstate New York and spends more than an hour commuting to her marketing job in New Jersey.

Alan Thomas says he hopes to repay his student debt in a few years

When she enrolled in college, she was not aware of all of her borrowing choices. "To be honest, I think I was uneducated on my options back then," she says.

In hindsight, Ms Varetoni would have compared rates of various lenders, and might have considered a less expensive university for at least part of her degree.

"Five years from now, I'm hoping I'm able to move out of my parents' house," she says.

Many students find that once their undergraduate degree is paid for, graduate study poses another financial challenge - though there are also those who cope well.

Alan Thomas, 36, graduated without any student debt, then decided to go to law school in 2007, after hearing that first-year lawyers earned six figure salaries right out of law school.

"Obviously, that picture has completely changed," he says.

Mr Thomas now owes $130,000 in student loans. He is paying 8.25% interest on the money he borrowed to finance his law school tuition and living expenses, having deferred his student loan payments while he set up his own law practice, which he runs out of his home.

Paying his loans on time is no mean feat, given that his monthly bill is $1,000.

But Mr Thomas' house doubles as his office, and he watches what he spends. "I am extremely frugal," he says.

Consequently, he should be debt-free in the near future, he reckons.

"I would say four to five years if I am very careful," he says.

"I can probably manage to get rid of the whole thing, and I am really looking forward to that."